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The whys and wherefores of Myanmar’s 'depressed' economic situation have been debated ad nauseam by mainstream economists. On the other hand, the ruling military junta, be it the current State Peace and Development Council (SPDC) or its predecessor the State law and Order Restoration Council (SLORC), has claimed that the economy was anything but 'depressed' in the last decade or so. In fact, the junta’s Secretary-1, Lt. Gen. Khin Nyunt, stated in March that instead of collapsing under the West’s sanctions Myanmar's economy had continued to develop with the government being able to lay down positive economic foundations for the future. It seems that those ruling Myanmar today are concerned not about economic collapse but why its gross domestic product (GDP) had not grown faster than the purported annual average growth of 5.7 per cent registered in the region in the last seven fiscal-years. Their answer is to blame depressed foreign investments, caused by the Asian economic crisis; bad weather brought about by the 'El Nino' phenomenon; political opposition led by Aung San Suu Kyi and the National League for Democracy; the United States and its allies; misguided non-governmental organizations; and the hostile international media.
In response, the World Bank has argued that the mini-boom of the mid-nineties, with its flurry of business transactions, hectic construction activities and relatively large foreign direct investment (FDI) inflows, did not bring about sustainable growth and substantial benefits to the population at large. The Bank also noted the low priority assigned to the social sector in the budget and the attendant problems in income, health and education. It estimated that about 25 per cent of the population was living below minimal subsistence levels; there was a high level of moderate and severe malnutrition among preschool-age children; and a quarter of school-age children never got to enroll in primary school at all while drop-out rates were very high.
There were other telling indications that behind the impressive GDP growth figures there lurks a malaise brought about by dysfunctional policies and distorted markets. One example, at the micro-level has been the censorship (manifested as blacked-out sections of text) on reports about rice prices and supplies in vernacular economic magazines which suggested that, despite the much-vaunted 'summer rice' campaign and claims of high yields and expanded acreage, there are uncertainties associated with rice distribution and the soaring price of rice (the most important amongst Myanmar’s household requisites). Another indicator of the desperate situation in the foreign-exchange sector was the 23 February announcement by the labour ministry (abruptly rescinded within a month) that Burmese expatriate workers must remit 50 per cent of their gross income back home. Family members or authorized representatives would be issued (US $ denominated) foreign exchange certificates (FEC, that cannot be re-converted back to US dollars) Those who would like to seek employment abroad on their own accord would have to pledge compliance with two guarantors who would have to put up a surety of one million kyats (worth about US$ 3,000 in the open market, in a country whose per capita income was estimated at US$ 300 by the World Bank).
These reinforced, at the micro-level, what the World Bank had posited at the macro-level regarding the depressed nature of Myanmar's economy at the dawn of the 21st century. As for the solution, one could not but agree with the World Bank report that long term stability and development will not be achieved in Myanmar unless the state adopts a 'more "pro-people" stance' and 'resolves long-standing political and human rights controversies' in addition to wide-ranging reforms in the financial sector, a rationalization of fiscal polices, a revamping of agricultural trade (especially that of rice), restructuring of state enterprises, and the dismantling of extensive restrictions on 'private sector activity'.
WATCHPOINT: Can the 'self-reliance solution' of a new drive for agriculture production in wastelands, natural gas sales and (the yet to materialize) Japanese aid come to Myanmar's rescue?
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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